Pope Benedict XVI is in the West Bank town of Bethlehem, as part of a trip to Israel and the Palestinian territories, BBC reported.
He will hold a mass in the town, the birthplace of Jesus Christ, and will also give a homily in Manger Square.
Speaking on arrival, he called for a just and lasting peace in the region and offered support for Palestinians' right to a homeland.
One of the aims of the pontiff's visit is to preserve a diminishing Christian presence in the Holy Land.
On Tuesday, a row flared over his membership as a teenager of the Hitler Youth, as he paid an historic visit to holy sites in Jerusalem.
Vatican spokesman Rev Federico Lombardi said the pontiff had "never, never, never" belonged to the organisation.
But his remark appeared to contradict the Pope's own words in his 1997 memoirs, Salt of the Earth.
"As a seminarian, I was registered in the HY [Hitler Youth]," he said then. "As soon as I was out of the seminary, I never went back."
The Rev Lombardi sought to make a distinction between the anti-aircraft auxiliary corps the Pope was enrolled in towards the end of the war and the Hitler Youth, which he described as a "corps of volunteers, fanatically, ideologically for the Nazis".
Pope Benedict was met by Mr Abbas on arrival in Bethlehem.
Speaking at a news conference at Mr Abbas' residence, he expressed support for a Palestinian state.
"The Holy See supports the right of your people to a sovereign Palestinian homeland in the land of your forefathers, secure and at peace with its neighbours, within internationally recognised borders," he said.
He offered "deep compassion" to the victims of the recent conflict in Gaza.
But he said Palestinians should "resist temptations to resort to acts of violence".
He has a busy day in the town in which he plans to celebrate an open air mass and to give a homily in Manger Square in front of the Church of the Nativity, the oldest church in the world, the BBC's David Willey in Jerusalem says.
Although the Christian population of Bethlehem has fallen dramatically in recent years through immigration, the square is expected to be packed with local Christians and pilgrims from other parts of the world, our correspondent says.
Later in the day, Benedict plans is due to visit a nearby Palestinian refugee camp and to have talks with Palestinian leader Mahmoud Abbas.
The pontiff will also meet representatives of the tiny Catholic community in Gaza who have been given special permission by the Israeli authorities to travel to Bethlehem.
On Tuesday, the Pope visited sites in Jerusalem holy to Muslims, Jews and Christians.
He went first to the Dome of the Rock, the first pontiff to do so. It is located on the Temple Mount - a site sacred to all three monotheistic religions, and met the Grand Mufti of Jerusalem, Mohammed Mohammad Hussein.
Then the Pope followed Jewish tradition at the Western Wall, inserting a written prayer in the cracks between the 2,000-year-old stones.
He emphasised the ties that bind Christianity with Islam, and with Judaism.
"Today I have the opportunity to repeat that the Catholic Church is irrevocably committed to... a genuine and lasting reconciliation between Christians and Jews," he said.
Later at a Mass in the Josaphat Valley, he said it was a "tragic reality" that many Christians had left the region.
"In the Holy Land there is room for everyone," he said, prompting applause from the congregation.
Israel has beefed up security for the trip in an operation named "White Robe", with tens of thousands of law-enforcement officers deployed and entire sections of Jerusalem shut down.
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